How Impact Investing Can Earn Returns, Peace of Mind

Feb. 18, 2014

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More people now favor environmental protection, spurring investment in clean-energy technology in a nation that now burns far less coal than it used to. And some large companies are focused on environmental goals in their operations because this can represent cost-effective management.

In the broader corporate workplace, there's far more emphasis on minority recruitment and promotion than there was in the 1990s — and that has opened up stocks in companies following that trend to impact investors focused on this issue.

Another key value for impact investors, corporate governance, received a big boost from negative examples in the early 2000s with the implosion of WorldCom and Enron after the companies misled investors, and from the excessive risk taken by major financial service companies in real estate and mortgage-based investments that contributed to the market meltdown of 2008–09. If they didn't already believe in responsible corporate governance, investors who lost 50 percent of their nest eggs when the markets plummeted became overnight believers in ESG investing's emphasis on managing risk.

Since then, far more investors look for strong risk management, and they've become ESG investors after a fashion. Thus, forgoing investment in what you don't believe in and pursing it among companies you wish to empower is no longer an idealistic investor's costly indulgence. Rather, it's a viable investment strategy that, if skillfully directed, can earn returns while helping you sleep at night, confident that you're not financing those who create what you view as problems or stinting on those who solve them.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Ted Schwartz, a certified financial planner, is president and chief investment officer of Capstone Investment Financial Group. He advises individual investors and endowments, and serves as the adviser to CIFG UMA accounts. Because Schwartz has a background in psychology and counseling, he brings insights into personal motivation when advising clients on how to achieve their wealth management goals. Schwartz holds a B.A. from Duke University and an M.A. from Oregon State University. He can be reached at ted@capstoneinvest.com.